
Brunswick Webinar with Jon McLeod Understanding the new Government: Issues for 2020 Official Transcript th Originally recorded on 18 December 2019 © BRUNSWICK GROUP 2019 | CONFIDENTIAL | 1 JON McLEOD: Good morning and welcome to “Understanding the New Government Issues for 2020”. I am Jon McLeod, Head of Public Affairs at Brunswick Group. In the room with me is Anna Wallace, Director of Political Relations at PWC UK. She works closely with the firm’s executive board to advise on political issues, including political risk and Brexit. Anna joined the firm in 2014 and has more than a decade’s experience in public affairs and political relations. We also have John O’Connell, who joined the TaxPayers’ Alliance as an intern in 2009 and has risen to glory because he became Chief Executive in August 2016. He has turned the TPA into one of the most influential public interest pressure groups in the country, authoring influential papers including “How to save £50 billion” and producing publications on tax reform. He speaks often on radio and television and is a graduate of Nottingham University. We have Matt Kilcoyne, who is the Deputy Director of the Adam Smith Institute. Matt began life as an underwriter in the City of London before he joined the Government of Catalonia. That is a lively Government, to say the least! Maybe we will get on to the SNP later. He was a trade and investment adviser there. He was a co-director of Political City and his research interests are trade, Brexit and financial services regulation. He has authored and contributed to multiple reports for the Adam Smith Institute including “Doing our Duty” and on the neoliberal manifesto. Finally, in the room is Duncan McCourt, my colleague and a Partner at Brunswick in London. He joined us from the Treasury, where he was Chief of Staff and Special Adviser to the former Chancellor Philip Hammond, advising on issues including Brexit, financial services and healthcare. He also advised Mr. Hammond when he was at the Foreign Office. Earlier in his career Duncan was a management consultant and worked in European equity strategy at Credit Suisse and JPMorgan Chase and consulted at the World Bank and KPMG in Washington DC. It is an exciting panel and we are going dive straight in by looking firstly at what we would take as the top five takeaways for business from the general election 2019. We have had quite a lot of talk about the political aftermath, but what are business to make of where we are now? I am going to hand over to kick off on that to Anna Wallace of PWC. Anna, what do you have for us on this? ANNA WALLACE: Good morning. I will assume that people have read the results in the last week and, as you say, I will concentrate on what some of the business takeaways are from the election. I guess the first thing to say is that, regardless of your views of our new Prime Minister, his emphatic victory does at least provide a stable environment for business, one that, frankly, has been sorely missed by business for many years now. The scale of the majority should mean that we have certainty in Parliament. There will be none of those late-night knife-edge votes that we have all lived and breathed for the last couple of years. The field of Brexit horses has narrowed, so lots of businesses which have Brexit plans on hold will be able to execute those. Our sense in talking to business (including international investors) is that the UK becomes a far more stable investment environment again. I think we have seen some of the investment houses already adjusting their ratings for the UK to that effect since last week’s result. As I mentioned, this was the most certain outcome from a Brexit point of view because it was the one party which had, effectively, draft legislation published, so the Prime Minister gets on with delivering Brexit, putting his Brexit oven ready deal in the oven and baking it by 31 January. That certainty comes in the near term, but in the medium term some of the uncertainty returns, so what does the future trading relationship look like when we get into negotiations beyond 31 January? More broadly, other political risks like that might move back on to the radar in the medium to longer term, in particular with independence risks up in Scotland, but also with the Nationalists in the ascendency in Northern Ireland, there will potentially be challenges as the Brexit deal is implemented in Northern Ireland, and again in the medium to longer term, potential challenges around reunification polls, border polls. Some of those political stability risks for businesses do not entirely go away. Thirdly, I think the policy landscape has changed. I am keen to emphasise that when Boris became Prime Minister in July that was a very different Administration from the May Government that had gone before it. This is clearly another very different Administration. The policy environment has changed. The spending taps are on. The Government will be keen to demonstrate an end to austerity, with big public spending in © BRUNSWICK GROUP 2019 | CONFIDENTIAL | 2 public services, so delivering those 20,000 police officers, 50,000 nurses and funding for education, but also big spending taps turned on in transport and infrastructure, so a boon for businesses in those areas. There is talk this morning of £100 billion for transport and infrastructure projects across the UK. I would expect that a lot of that will be concentrated in the north of the country where the Prime Minister will be seeking to hold on to and maintain trust and credibility with those voters in the “red wall” seats, but also one thing that the Conservatives historically have been very good at when it comes to infrastructure spending is small projects that make a real difference to local people’s lives. We can also expect not just the big, shiny Boris projects but also some forensic investment in things like bus services, perhaps restoring bus services to improve connectivity in local areas, investing in potholes and things like that, that really matter to people on the street and/or a cynic might say will help the Government hold on to its votes in the coming years. The fourth thing I would say is that the policy environment has definitely changed and the spending taps are on, but if you look at the Conservative manifesto, it was not the most detailed in terms of how it actually delivers some of these ambitions. Jon is showing it to me and he has printed it out on big paper which makes it look like it is more detailed, but there is a great opportunity for organisations like James’s and Matt’s, as well as for businesses, to shape what the solutions to delivering those ambitions look like. There is a bit of a gap in the market there and so businesses which have particular views in their areas should get a good hearing in Government as they seek to roll out those ambitions. A final point, thinking more broadly about the business regulatory environment, I am really interested in, and I think Matt is going to tell us, what kind of Boris we are going to get, because I think that really dictates what happens in the next five years. The size of his victory means that he does not have anywhere to hide. When it comes to legislation it is not like he is going to be beholden to one wing of the party or another. I have seen some articles, including an FT piece last week, suggesting this means that he can now control the ERG, for example, and we will end up with a softer Brexit and he will be able to return to the pro-enterprise, pro-business Boris that we saw when he was Mayor of London. That may be true, but I am also looking for the evidence to tell me that the opposite would not be true. How do we know that he will be a one-nation Conservative rather than a populist Prime Minister? Some of the things that we have started to see come out of Number 10 in the last couple of days - for example, Ministers banned from going from Davos because this is a Government that is delivering for the people and not for “champagne billionaires”, I think was the phrase that was used in the briefing from Number 10. The front page of the Sunday Times at the weekend showed that while the water companies might have dodged a Labour nationalisation risk, Ofwat is still prepared to deliver a punitive financial settlement for that sector. I suspect that while Boris’s instincts might be generally deregulatory, if there is consumer harm, if there is a political buck to be made, I do not necessarily think that this is a Government that will be anti-state intervention. Just a slight word of warning that this is not necessarily going to be a big deregulatory Singapore-on-Thames type Government. I think it will be more nuanced on that depending on which part of the economy you operate in. JON McLEOD: Before I turn to Matt Kilcoyne from the Adam Smith Institute, Anna, we have heard talk of a beefed-up Business Department. Maybe it could be called the “F Business Department”. What does that mean, given what you have said about a slightly more hawkish regulatory environment? How do businesses get their arms back round the political institutions of the Government and enter a strong dialogue about the value of enterprise over the next five years? ANNA WALLACE: I think probably it will be two things, one logistical and one more strategic.
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